Life and pension firms' shares enjoyed mixed fortunes at the start of the week after sharp falls in the previous session prompted by the disclosure of a new regulatory probe into the sector were described as exaggerated by some analysts.

Aviva benefited from more positive sentiment but Legal & General and Prudential both fell again in the wake of the investigation being confirmed on Friday by the Financial Conduct Authority (FCA).

Meanwhile the wider FTSE 100 Index saw early session gains evaporate as it ended in the red, down 17.2 points to 6598.4.

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Blue-chip shares had started the day on the front foot as they followed overnight gains on Asia markets, prompted by hopes of a stimulus boost for China.

But they levelled off, before turning negative, as markets contemplated continuing global uncertainties including ongoing tensions over Ukraine and the prospect of deflation in Europe.

Germany's Dax and France's Cac 40 were down as eurozone inflation fell to its lowest level in more than four years, raising the prospect of a fall in consumer prices, which would risk choking off growth. On currency markets, sterling held firm at 1.67 US dollars and 1.21 euros.

In London, some insurers saw a partial paring back of declines last week after the FCA confirmed plans for an inquiry into 30 million financial policies sold between the 1970s and 2000 amid fears of "rip-off" charges and sub-standard service.

But analysts at Societe Generale said: "The market seems to have over-reacted on Friday to a leaked announcement from the UK's FCA which initially suggested far-reaching reforms could be on the agenda in a summer review on legacy products."

In a note on Aviva, they pointed out that the FCA had indicated that the review would not seek to remove exit charges on the "legacy" insurance products covered by the probe "The FCA review is unlikely to be as far reaching and aggressive as initially feared," they added. "We think panic had set into the market following the pension reforms in the UK budget - which were unexpectedly far reaching."

The improved sentiment helped Aviva climb more than 1%, or 6.8p, to 477p, while Friends Life insurer Resolution - which had plunged 7% in the previous session - was up 2.5p to 298.8p.

But elsewhere in the sector, Legal & General, which lost more than 3% on Friday, edged another 0.3p lower to 204.7p, while Prudential dipped 12p to 1268.5p.

The biggest FTSE 100 risers were Babcock International up 55p to 1347p, Pearson up 24p to 1063p, Mondi up 23p to 1049p and ARM Holdings up 20.5p to 998p

The biggest FTSE 100 fallers were SSE, down 42p to 1469p, Shire down 76p to 2945p, St James's Place down 19p to 825p and Associated British Foods down 49p to 2781p.